will be due five years later. In addition to the one-time loan costs of $120,000 the company will also have the cost of the borrowed money which is $360,000 ($4 million X 9%) of interest each year for five years. It...
will be due five years later. In addition to the one-time loan costs of $120,000 the company will also have the cost of the borrowed money which is $360,000 ($4 million X 9%) of interest each year for five years. It...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
Issue Costs of $50,000. The carrying value of the bonds is $2,800,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
What is the difference between a note payable and a bond payable? Definition of Note Payable and Bond Payable For accounting purposes, a note payable and a bond payable have the following similarities: Formal written...
$1,000 bond. An investor will purchase the 5% bond only if the cost is low enough to yield 6% over the remaining life of the bond. In other words, the investor will pay less than the $1,000 so that the effective...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
The interest rate specified or stated in a note payable or in a bond payable. Often this rate is fixed and will not change during the life of the note or bond.
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
A contra liability account that reports the amount of unamortized discount associated with bonds that are outstanding. The discount on bonds payable originates when bonds are issued for less than the bond’s face or...
of manufacturing overhead costs also allows for the computation and application of several departmental overhead cost rates instead of having a single, plant-wide overhead rate. This is important when there are a...
costs because they are not assigned to products, and therefore cannot be included in the cost of items held in inventory. If a selling, general and administrative (SG&A) expense is prepaid, the prepaid portion will...
predict and estimate the future costs, but the past costs are otherwise irrelevant to the decision. That is why accountants will refer to a past cost as a sunk cost. Examples of Relevant Costs Assume that a company has...
How do you calculate opportunity costs? Definition of Opportunity Costs Opportunity costs are the profits a company (or person) missed, or the contribution margin that was missed. Opportunity cost might be thought of as...
Are transportation-in costs part of the cost of goods sold? Definition of Transportation-in Costs Transportation-in costs, which are also known as freight-in costs, are part of the cost of goods purchased. The reason is...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At...
costs; what the costs should be) the company is on track to reach the cost part of its profit plan. If the actual costs deviate from the standard costs, management is alerted by the variances that are reported for...
What is the difference between stocks and bonds? Definition of Stocks Stocks, or shares of capital stock, represent an ownership interest in a corporation. Every corporation has common stock. Some corporations issue...
What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. Marketable securities are often classified into two groups:...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
The number of shares of stock that a corporation may issue. The amount is specified in the corporation’s articles of incorporation.
A document filed when a corporation is formed. Among other things, it lists the number of shares of stock that the corporation is authorized to issue.
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
See bond sinking fund.
by the corporation will be deductible on the corporation’s income tax return. If a corporation’s combined federal and state income tax rate is 35%, then $100,000 of interest expense will save the corporation $35,000...
of semiannual interest payments that are part of a bond payable is an example of an ordinary annuity. A 10-year bond with a face value of $10 million and a stated interest rate of 6% will include an ordinary annuity...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
What is common stock? Definition of Common Stock Common stock refers to the shares of ownership interest in a U.S. corporation. The owners of the common stock are referred to as common stockholders, common shareholders,...
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
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